Traders wait for PPI data and the Fed's stance, the U.S. dollar index pulls back

XM Foreign Exchange APP News - During the European session on Monday (November 24), the U.S. dollar index (DXY) ended its five-consecutive-day rise and fell slightly to around 100.09, mainly due to the continued increase in market expectations for an interest rate cut by the Federal Reserve in December. The pullback coincides with the release of U.S. PPI data on Tuesday, which is expected to dominate the direction of short-term fluctuations in the currency market. ING analysts believe that the prospects for progress in Ukraine peace negotiations and the future release of the "Beige Book" may bring downside risks to the US dollar. The resistance faced by the U.S. Dollar Index in the 100.25 to 100.35 range may be difficult to break. Analysts at Oversea-Chinese Banking Corporation (OCBC) believe that Williams supports an interest rate cut, and this stance has raised the probability of an interest rate cut in December to more than 70%. While the probability of a rate cut in December remains volatile, the magnitude of rate cuts between now and the end of 2026 is relatively stable, with a total of 90 basis points expected. This may explain why the dollar exchange rate has not experienced greater volatility - because only short-term expectations have been affected. The probability of a rate cut rises, and the Fed's signal turns. As the market prices the probability of a rate cut in December, the dollar's momentum has weakened. According to the Chicago Mercantile Exchange (CME) FedWatch Tool, the probability of the Fed cutting interest rates by 25 basis points in December has risen to 75% from 42% a week ago. Statements by key Fed officials are an important driver of this expected shift: New York Fed President John Williams said policymakers may still adjust interest rates "in the near future"; Fed Governor Stephen Millan pointed out that recent non-farm payroll data supports a December interest rate cut, adding that if he had the right to vote, he would support 25 basis points rate cut. However, Boston Fed President Susan Collins remains on the sidelines, leaving some uncertainty in the market. Inflation concerns have not disappeared, and consumer confidence improved slightly. The University of Michigan's consumer confidence index rose slightly to 51 in November from the initial value of 50.3. Although it was higher than the preliminary statistical value, it was still lower than October's 53.6. Inflation expectations showed a mild decline: one-year inflation expectations fell from 4.7% to 4.5%, and five-year inflation expectations fell from 3.6% to 3.4%. The data showed that U.S. household confidence has recovered slightly but remains cautious about inflation. Market Outlook: The U.S. dollar faces short-term downward pressure. Although the U.S. dollar index rose last week, the U.S. dollar still faces short-term headwinds as traders weigh the dual impact of rising interest rate cut expectations and the Fed's divergent stance. With PPI data and more speeches from Federal Reserve officials about to be released, investors are taking a more cautious stance. The dollar's short-term performance may depend on upcoming inflation and employment data and clear signals from policymakers. If the Fed confirms a shift to easing policy, the dollar may remain under pressure until the end of the year.

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